Chapter8 - Capital Gains The Finer Points Chapter 8 By...

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Unformatted text preview: Capital Gains: The Finer Points Chapter 8 By James B. MacNeill Foreign Exchange Section 39(2) Generally mirrors capital vs. income argument The deminimus rule for individuals is $200 Part Disposition Rule found in section 43 Allocate ACB to disposition on a reasonable basis Exchange of Property Section 44 Allows for a deferral where property is sold and then replaced Applies to voluntary and involuntary disposition Elective procedure Reinvested proceeds are not taxed Replacement property must be purchased within one year for voluntary dispositions and two years for involuntary dispositions Former Business Property Definition found in section 248 Land and building Not a rental property Replacement Property Definition found in section 44(5) Acquired for the same or similar use Proceeds of Disposition of Building See example on page pages 381 382 of text Property with More than One Use Section 45 Changes in use constitute a deemed disposition Applies to proportional changes 45(2) election available for personal use properties Change in Use of Principal Residence Applies to rental of principal residence Designation under 45(2) for up to four years Can not claim CCA against income Leaving Canada Rules found in section 128.1 Deemed disposition of all capital property Exceptions are: 1) Real Property Sites in Canada 2) Private Shares of a Canadian Corp. 3) Canadian Business Property 4) Deferred Income Plans (RRSP's, etc.) Options Applies to put and call options Generally a nil ACB Grantor of Option is entitled to a reassessment, if option is exercised Debts Established to be Bad Debts Section 50 Deemed Disposition Convertible Properties Rules found in section 51 Proceeds are deemed to be cost where security is converted Capital Gains Deferral New deferral mechanism Narrow application Section 44.1 Applies to small business corporation investments Up to $2 million deferral Replacement must be made within 185 days NonArm's Length Transaction Rules found in section 69(1) See definition of NonArm's Length (251(1)(a)) Transactions take place at fair market value Death of a Taxpayer Section 70 Deemed disposition on death (70(5)(a)) Capital Gains: The Finer Points Chapter 8 By James B. MacNeill ...
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